About Me

Author of "Common Genius" -- a brief history of how common people built the prosperity of free nations, and how the intelligentsias usurp control and bring on decline -- go to: www.thecommongenius.com
Just published the sequel--"Wasted Genius," How IQ and SAT tests are Hurting Our Children and Crippling America. An analysis of how our schools and colleges are adding the the intellectual morons who make up the New Ruling Class. See www.thewastedgenius.com

Sunday, September 29, 2013

Is Economics a Real Science or a Pseudo-Science?

As a contrarian by nature, I have to wonder if
it makes sense for our government to spend trillions of dollars to
"stimulate" the economy. In short, do the ex-Goldman Sachs execs and
their banker buddies who run the Federal Reserve System and the U. S. Treasury
Department really know what they are doing? Another way of stating this is to
ask "Is Economics a true science?"

We have seen in recent years (actually
centuries) the coming and going of different abstract economic theories and the
failed nature of most "modeling" attempts. And the profession's
efforts during the last 100 years to "fine-tune" the economy have
certainly failed--the cyclical booms and busts have increased in both intensity
and frequency. During the past 40 years, while top economists debated the money
supply, inflation, fiscal and monetary policy, a series of monstrous financial
debacles recurred over and over again. The savings lost by Americans during the
recent mortgage melt-down was a monumental failure on the part of the nation's
economists.

Admittedly, the melt-down was primarily caused
by a misguided political policy to grant loans to borrowers who were not credit
worthy on properties with inflated values. But why did economists support those
policies? Many worked for financial organizations that profited from the large
volume of dubious transactions so were influenced by a bias of self-interest.
But many did not benefit directly from the bubble. They just went along with
the crowd--the politically correct path. If this analysis is correct, economics
is either a fraud or its experts are intellectually dishonest.

Thomas Sowell has pointed out that there are the
"hard" physical sciences like math, physics, and chemistry; and there
are the soft sciences like political science, sociology, and anthropology. Sowell's
distinction indicates that when you are dealing with inanimate objects, like
atoms, numbers, and planetary motion, there are certain "laws" that
govern activity. But, when dealing with human beings, there is little certainty
about anything. So where do we place "economics?" The basis of all
economics is what the individual citizens arefrom time to time doing, so it has to be a "soft" science!
Nothing is more erratic than human activity!

If we admit to this inadequacy, we can see that
postulating universal axioms for economic activity is, if not futile, at least
subject to wide ranges of predictability. Compared to astronomy, an economic
model would be akin to knowing that the earth revolves around the sun somewhere
between one and ten times a year, depending on a variety of unknown forces that
vary every few months!

Nevertheless, the noted Nobel Prize winning
economist Paul Krugman believes that he can manipulate economic activity based
on his knowledge of human behavior. In his Introduction to the Folio Society's recent
publication of Isaac Asimov's "The Foundation Trilogy," Krugman
recalls how as a young man the series inspired him to study economics:"I grew up wanting to be Hari Seldon,
using my understanding of the mathematics of human behavior to save
civilization." A true ivory-tower academic, Krugman thus reveals his
intellectual arrogance, a preference for abstract theory over scientifically
observable results, and an almost Messianic wish to save the world! Please God,
keep us safe from such noble intentions!

Krugman may actually have sufficient hubris to
believe that he has "The Power" to control the economy, and to
understand the "mathematics of human behavior." But does any sane
person believe him? Isn't he just a useful tool for the bankers that run the
Treasury Department and the Federal Reserve? They are the major financiers of
Wall Street. They are playing for keeps and always seem to come out a few
billion dollars ahead of everyone else. Aren't they just using all the economic
mumbo-jumbo of the Krugman's to line their own pockets? Are all the economists
in tacit league with the bankers just to keep their jobs? Do the politicians
usually support Keynesian policies merely to justify their position and
increase their regulatory power?If you
answered "yes" for all go to the head of the class!

If there is a mathematical formula to human
behavior it is best evidenced by the recurring efforts of leaders to administer
economic controls, jiggle monetary policy, and apply fiscal/tax incentives to
manage their nation's economies. This mathematically predictable hubris on the
part of leadership elites has proven to be, unfortunately, a reason to
disbelieve all such claims! Robert L. Schuettinger and Eamon F. Butler's book,
"Forty Centuries of Wage and Price Controls," documents how such
efforts have consistently failed since Hammurabi attempted it about 4,000 years
ago! Of course, such predictable behavior, repeating policies that have always
failed, and hoping for better results, is a form of insanity. Fortunately, such
predictably bad behavior is limited primarily to abstract-thinking
intellectuals who are more fascinated with elegant theory than actual results.

It is this elevation of theory over practice
that renders economics a "soft" science. In engineering, a machine
must function efficiently to be used, regardless of the beauty of its design.
To the extent that economic theories have been tested in practice they have
never proven useful. No attempt was ever made to measure their effectiveness,
nor can such measurement be accurately made.Without accurate measurement no pursuit can be called scientific. The economic health of a society is the sum
total of its inhabitants' activity and, humans being as unpredictable as they
are, most governmental efforts to direct their energy serve more as a
suppressant than a stimulus. In fact, economics, although a soft science, has
proven to give us mostly hard financial landings.

Bob, That is a very good point. Unfortunately, abstract thinkers in the soft-sciences are wanna-be scientists, but are fatally afflicted with a fanaticism that defies logic, and undermines their atempts at using the "scientific method."

This weakness was illustrated by Coulter's book- 70 Years of Treason--which simply observes that the intellectual Left in Western nations clung to the vision of the USSR/Stalin experiment in communism, and many still believe in it!

Now, note that 70 years is a couple generations of intellectuals--all turning a blind eye to the consistent failure of socialist central planning! Also, note that repeating the same failed policy over and over is a form of insanity!